President of India v La Pintada Compania Navigacion S.A. (La Pintada)

JurisdictionEngland & Wales
CourtHouse of Lords
JudgeLord Fraser of Tullybelton,Lord Scarman,Lord Roskill,Lord Bridge of Harwich,Lord Brandon of Oakbrook
Judgment Date24 May 1984
Judgment citation (vLex)[1984] UKHL J0524-2
Date24 May 1984

[1984] UKHL J0524-2

House of Lords

Lord Fraser of Tullybelton

Lord Scarman

Lord Roskill

Lord Bridge of Harwich

Lord Brandon of Oakbrook

President of India
(Appellant)
and
La Pintada Compania Navigacion S.A.
(Respondents)
(on Appeal from the Queen's Bench Division of the High Court)
Lord Fraser of Tullybelton

My Lords,

1

I have had the advantage of reading in draft the speech of my noble and learned friend, Lord Brandon of Oakbrook. His reasoning seem to me irresistible and I feel myself driven, though with reluctance, to agree that this appeal must be allowed, with the consequence that the arbitrator's alternative award will be upheld.

Lord Scarman

My Lords,

2

I agree with the speech to be delivered by my noble and learned friend, Lord Brandon of Oakbrook, a draft of which I have had the opportunity of studying. But I wish to associate myself with the comments made by my noble and learned friend, Lord Roskill. I also reach with regret and reluctance the conclusion that the appeal must be allowed. The sooner there is legislation along the lines proposed by the Law Commission (or some other solution achieving the same end) the better.

Lord Roskill

My Lords,

3

I have had the advantage of reading in draft the speech of my noble and learned friend Lord Brandon of Oakbrook. If I may respectfully say so I find his reasoning, leading to the consequence that this appeal must be allowed and the alternative award of the umpire upheld, compelling. But I freely confess that I have arrived at this conclusion though without doubt nevertheless with both regret and reluctance. It has long been recognised that London, Chatham and Dover Railway Co. v. The South Eastern Railway Co. [1893] A.C. 429 left creditors with a legitimate sense of grievance and an obvious injustice without remedy. I think the House in 1893 recognised those consequences of the decision, but then felt compelled for historical reasons to leave that injustice uncorrected. Since 1893 Parliament has intervened twice, first to remedy what my noble and learned friend has called case 3 and secondly to remedy case 2. On the latter occasion Parliament, with the Law Commission's report before it, had the opportunity also to remedy the injustice to creditors to which case 1 (a debt paid late but before proceedings for its recovery have been begun) can so often give rise. But Parliament neither accepted the Law Commission's proffered solution to case 1 nor provided any substitute solution of its own. It must, I think, therefore be accepted that this inaction was deliberate. If so it cannot be right for this House in its judicial capacity by departing from the London, Chatham and Dover Railway case to proffer a remedy which if applicable at all must apply to all three cases and not only to case 1 with the consequence that as regards cases 2 and 3 there would be concurrent and inconsistent remedies, one statutory and discretionary, the other at common law and as of right since once a breach of contract and damage caused by that breach are proved a court has no discretion but must award the damages claimed in full.

4

My Lords it would be idle to affect ignorance of the fact that the present state of the law in relation to case 1 places the small creditor at grave disadvantage vis a vis his substantial and influential debtor. The former may fear to offend the latter by instituting legal proceedings either swiftly or indeed at all and it is notorious that some substantial and influential debtors are not slow to take advantage of this tactical strength, especially in times of financial stringency. It has taken two pieces of legislation, one some 50 years after 1893 and the other almost another half-century later, to remedy the injustice in cases 2 and 3. I venture to hope that whatever solution be ultimately adopted in case 1, whether the Law Commission's somewhat complicated solution or something simpler, that solution will be found promptly and the remaining injustice in this branch of the law finally removed.

Lord Bridge of Harwich

My Lords,

5

I have read with admiration the comprehensive analysis and resolution of the issues arising in this appeal in the speech of my noble and learned friend, Lord Brandon of Oakbrook. I fully agree with his reasoning. I have only two observation to add in support of the conclusion that it would be a wholly inappropriate exercise of the judicial function for your Lordships' House now to depart from the rule laid down in London Chatham and Dover Railway Co. v. South Eastern Railway Co. [1893] A.C. 429 that the common law does not award general damages for delay in payment of a debt beyond the date when it is contractually due.

6

First, if your Lordships were to reverse that rule, the alternative rule which must of necessity takes its place could only be that in all cases of late payments general damages would be recoverable as of right calculated in accordance with the same common law principles that govern the award of general damages in the case of any other breach of contract. Such a sweeping provision would not merely be inconsistent with, but would, it seems to me, effectively override the carefully defined and restricted statutory provisions for the discretionary award of interest in certain cases so as to render them a dead letter.

7

Secondly, such a broad rule could make no provision, such as suggested by the Law Commission, for special cases where, even under the Commission's scheme for "statutory interest" which Parliament did not adopt, the award of interest would be unjust, nor could it incorporate the many detailed qualifications and refinements which the Law Commission recommended as necessary to the working of the scheme which the Commission proposed: see the Law Commission's Report on Interest, 1978, Cmnd 7729, paragraphs 45 to 102.

8

I would allow the appeal.

Lord Brandon of Oakbrook

My Lords,

9

Your Lordships have before you a combined appeal from two orders made by Staughton J. in the Commercial Court on 29 October 1982 and 1 July 1983 respectively, which comes to you direct under the leapfrog procedure introduced by section 12 of the Administration of Justice Act 1969.

10

There are two questions which the facts of the present case require your Lordships to decide. The first question is whether an umpire, in a London arbitration between shipowners and charterers, has power to award to the former against the latter interest on moneys due in respect of freight and demurrage, payment of which was made and accepted after the arbitration had begun but before it had been concluded. The second question is, if so, whether such power extends to the award of compound, as distinct from simple, interest.

11

While these are the two questions which the facts of the present case require your Lordships to decide, they raise by necessary implication wider questions of far-reaching general importance. The first such wider question is what remedies your Lordships should hold, at this stage of English legal history, are available to a creditor for delay in the payment of a debt due to him. The second such wider question is whether an arbitrator or umpire has power to award to a creditor against his debtor more extensive remedies than those to which such creditor would be entitled if, instead of bringing arbitration proceedings against his debtor, he brought an action against him in a court of law.

12

My Lords, the facts giving rise to the appeal are these. By a time charterparty dated 2 October 1973 the respondent company ("the respondents") chartered their ship, La Pintada ("the ship") to North Atlantic Oil Co. Ltd. ("North Atlantic") for a specified period. By a voyage sub-charter dated 28 January 1975 ("the voyage charter") North Atlantic sub-chartered the ship to the appellant for a laden voyage from north west Europe to India. Under the voyage charter, which contained a London arbitration clause, freight was to be calculated in U.S. dollars but paid in sterling, while demurrage was to be both calculated and paid in U.S. dollars. On 31 December 1976 North Atlantic assigned all their rights under the voyage charter to the respondents.

13

In May 1977 the respondents, as assignees of North Atlantic, began arbitration proceedings against the appellant in London, claiming substantial amounts for unpaid freight and demurrage. On 30 January 1981, after previous offers by the appellant to pay to the respondents the same amounts had not been accepted, the appellant paid and the respondents accepted £22,199.89 and U.S.$58,017.35 in settlement of the latters' claims for freight and demurrage respectively. It was later agreed that the two sums so paid and accepted correctly represented the principal sums due from the appellant to the respondents under the two heads of claim concerned. It was further held in the arbitration that the sum for freight should have been paid on 12 December 1978 and that for demurrage on 1 September 1975. Following the payment and acceptance of those two sums, the respondents limited any further claims against the appellant in the arbitration to interest and costs.

14

The arbitrators appointed by the parties having disagreed, the umpire entered into the arbitration, and by consent made an award dated 20 May 1982 in the form of a special case for the opinion of the court. By that award he awarded, subject to the opinion of the court on three questions of law stated by him, that the appellant should pay to the respondents, by way of compound interest, £8,035.46 in respect of freight unpaid from 1 February 1979 to 31 January 1981, and U.S.$43,320.55 in respect of demurrage unpaid for 1 September 1975 to 31 January 1981. The umpire further awarded that interest on the principal sums concerned should continue to be compounded from 1 February 1981 to the date of his award. He awarded such interest, not merely single but compound, on the...

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